In the current climate, people now more than ever are considering putting their affairs in order by making Wills.  Nowadays a simple Will is not always appropriate, particularly where there is a more complex family arrangement.

Simple Wills generally allow for all assets to pass to the surviving spouse, and then on to children, or other beneficiaries on the second death.  In theory, this seems fine, but it can lead to problems.

For example, if one person passes away and the survivor then goes into residential care, the value of their property could be swallowed up in care home fees. Or if the second person goes on to remarry, and fails to make a Will, or makes a new Will, the assets could end up being diverted to a new spouse, and the intended beneficiaries may end up with nothing at all.  You may simply want to ensure that children of a previous relationship are provided for, without depriving your current partner.

In these and similar circumstances, a life interest trust will may be something that you wish to consider.

What is a life interest trust Will?

A Life interest trust Will uses how a jointly property is owned to protect assets for the intended beneficiaries.

In order to create such a trust it is necessary to hold the property as tenants in common, which means each party owns a share (usually 50% each).  You then leave the other joint owner a life interest in your share in your Will.  When the first owner dies the survivor inherits a ‘life interest’ in the others share  They can continue to live in the whole house for the remainder of their life but only retain ownership of their own share.  If necessary, they can sell the house and buy another one so long as they preserve half the underlying capital in the new property for the intended beneficiaries.

There are of course advantages and disadvantages to these arrangements as listed below:

Advantages

Creating a life interest means you control who inherits your half share of the property.  It is therefore beneficial where there are second marriages, or complex family arrangements.

This is also a useful way of avoiding all of your assets going in care home fees.  If the survivor were to go into residential care, only their half share in the property would be used in the calculation of any contribution towards care home fees.

Disadvantages

On the first death, the survivor doesn’t inherit the deceased’s share of the house outright; they have a ‘life interest’ or the right to live in it.  While this may not be a problem in later life, it can be if one of the joint owners passes away at a young age.  For most people, their home is their main asset and only having access to half its value may cause an issue.

Not having access to all of your capital may also limit your choices if you were to go into residential care.  Some people would prefer to have more capital available to ensure they are not limited on residential care options and are comfortable in later life.

There are costs implications to put these arrangements in place once the first joint owner passes away, as a Grant of Probate will need to obtained and the legal title changed at the Land Registry.

It is also unlikely, once the first owner passes away, that they would be able to borrow against the property, whether by a standard mortgage or equity release, as they only own a half share in the property.

We can help

Our experienced team can discuss all the implications with you, and help you decide if this is right for you and your circumstances.

We would like to reassure all our clients, we are able to take initial instructions over the telephone, and provide professional advice to all our clients, and also to new clients who are concerned and want to review their arrangements.

If you would like to discuss making a life interest trust Will, simple Will or would like a member of our team to review an existing Will for you, please get in touch with a member of our team. Email wecanhelp@ringroselaw.co.uk or call 01529 301300.

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